MICRA’s Cap on Noneconomic Damages Does Not Apply to Joint Tortfeasor’s Pre-Trial Settlement to Offset Damages Award at Trial

In Rashidi v. Moser (No. S214430, filed 12/15/2014), the California Supreme Court held that in medical professional negligence cases, the noneconomic damages cap applies only to the amount of damages awarded to a plaintiff in court and does not require an offset of amounts received in settlement.

Pursuant to the Medical Injury Compensation Reform Act of 1975 (MICRA, Civil Code section 333.2), recovery of noneconomic damages is capped at $250,000 for professional negligence actions against healthcare providers. In California, liability for noneconomic damages is several only, so that defendants pay in proportion to their share of fault. In Rashidi, the Court had to determine whether a jury’s award of noneconomic damages, reduced by the trial court to $250,000 under MICRA, could be further diminished by setting off the amount of a pretrial settlement, despite that the defendant who went to trial failed to establish the comparative fault of the settling defendant. The Court found that only noneconomic damages awarded in court are actually capped, and it would be anomalous to allow a defendant to obtain a reduction against damages for which it is solely liable.

The plaintiff in Rashidi became blind in one eye after being treated for a severe nosebleed. He sued the manufacturer of a medical device used in the treatment, the hospital where the surgery was performed, and the treating physician. Before trial, the manufacturer settled for $2 million and the hospital for $350,000. Trial proceeded against the physician, and the jury awarded plaintiff $1,325,000 in noneconomic damages out of a total $1,450,000 in damages. The noneconomic damages were reduced to $250,000, conforming to MICRA’s cap. The physician then sought an offset, based on the pretrial settlements with the other defendants. The trial court rejected this claim, but the court of appeal held that the offsets were required. The court of appeal agreed with the physician’s argument that the $250,000 cap applies to the total amount of noneconomic damages a plaintiff may recover.

The California Supreme Court reversed. It held that because the physician did not establish at trial that any other defendant was liable for plaintiff’s injuries, he was not entitled to any offset. The Court further noted that MICRA’s limitation still serves its purpose of limiting exposure to liability, even if not applied to settlements. The prospect of a fixed award increases plaintiffs’ motive to settle, as settlement negotiations are based on liability estimates that are necessarily affected by the cap. The Court noted that a further reduction would actually have the perverse effect of discouraging pretrial settlements, with the hopes of an offset later at trial.

Rashidi is significant because a joint tortfeasor essentially waives its right to a settlement offset for the portion attributable to noneconomic damages if that defendant does not affirmatively prove the basis of the plaintiff’s claim against the settling defendant. It is now possible that the total amount of compensation that a plaintiff recovers for nonmonetary losses could vary depending on the number of healthcare provider defendants who jointly contributed to the plaintiff’s injury. Rashidi comes just after California voters rejected Proposition 46 in November, which would have raised MICRA’s cap to $1.1 million and indexed it to inflation.

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December 18, 2014